The Institute of Chartered Accountants of England has defined management accountingas: “Any form of accounting which enables a business to be conducted more efficiently can beregarded as Management Accounting”.As per American Accounting Association, “Management Accounting includes themethods and concepts necessary for effective planning, for choosing among alternative businessactions and for control through the evaluation and interpretation of performances.As per Institute of Chartered Accountants of India, “Such of its techniques and procedures by which accounting mainly seeks to aid the management collectively have come to be known as management accounting”.The Chartered Institute of Management Accounts (UK) defines management accountingas under:“Management accounting is an integral part of management concerned with identifying, presenting and interpreting information used for:1.Formulating strategy2.Planning and controlling activities3.Decision making4.Optimizing the use of resources5.Disclosures to shareholders and others external to the entity6.Disclosure to employees7.Safeguarding assets.”
Nature of management accounting:
Managerial personnel are entrusted with authority and responsibility of operating businessactivities. Management accounting provides information to the personnel are entrusted withauthority and responsibility of operating business activities. Management accounting providesinformation to the managerial personnel at three levels of management viz., top, middle andlower levels of management. It provides the management with the tools for an analysis of itsadministrative action that can lay suitable emphasis on the possible alternatives in terms of costs, prices and profits. The decisions made by management are based on quantitative information andcommon sense, foresight, knowledge and experience. Management accounting includes financialaccounting information and raw material from several other disciplines such as costing, statistics,mathematics, political science, sociology, psychology, management economics, law etc. With allthese data he can ensure optimum utilization of all the resources including employees bymaintaining sound morale of the employees, maximization of output and minimization of inputs,analyze the managerial questions in terms of costs, revenues, profits and growth. It is thus ahighly personalized service with the help of which management can explore and exploit businessopportunities and take sound and correct decisions. It is not a precise science as it uses its ownconventions rather than standardized principles. Therefore the inferences drawn from the facts provided, depends on the skill, judgment and common sense of different managementaccountants. Thus it is said that management accounting serves as a management informationsystem which enables the effective management of an enterprise.
Scope of management accounting:
Management accounting is a wide and diverse subject. As stated earlier it includes various branches of knowledge such as psychology, sociology, economics, laws, political science,mathematics, statistics, finanacial accounting, cost accounting etc. It is thus very difficult to